Greg Blotnick – CFA/NYSSA Membership, LinkedIn and Facebook

CS – “Sticking With Small Over Large”

Small caps set to benefit more under Trump administration

tax rate the key driver (and lack of foreign revenue)

Greg Blotnick IWMs

IWM’s “have become a show me story. The main DRIVER supporting small cap is Economic Indicators & Policy, as small tends to lead when real US GDP is 2-3% range. Small caps also benefit from protectionism due to lower international exposure (19% of revenues in the R2000 vs. 31% for the S&P 500) and the pursuit of a lower corporate tax rate in Washington (we estimate the R2000’s effective tax rate is 32% vs. 26% for the S&P). The small/large trade has also been positively correlated with interest rates since the Financial Crisis, meaning further increases in yields are likely to be accompanied by small cap outperformance. Retail Money Flows initially favored small cap post-Election, with inflows returning, but have started to trend positive for large again in the latest ICI update (we are watching trends here closely). Importantly, Valuations no longer support small over large, as our model is nearly back to neutral (though not expensive yet). On Investor Sentiment, a higher VIX should not derail small cap outperformance for the year as a whole, as long as the average for the year remains subdued (i.e. <25).

Blog Stats

Goodreads

Wells Fargo & Co's board is in talks with Harvey Schwartz, the former president and co-chief operating officer of Goldman Sachs Group Inc, to take over as the bank's chief executive, the New York Post reported on Thursday, citing people briefed on the discussion.

Indonesian investigators described the panic of pilots grappling with airspeed and altitude problems in the last moments of their doomed Lion Air flight, as comparisons mounted to a disaster in Ethiopia and authorities queued up to question Boeing.

Reuters - Biogen and partner Eisai Co Ltd are ending two late-stage trials for the experimental Alzheimer's drug aducanumab, in a setback to efforts to find treatments for the disease and for Biogen's stock, which lost more than $17 billion of its value on Thursday.

A political rift has emerged in Berlin over whether Germany should put its financial muscle behind a merger of Deutsche Bank and Commerzbank, politicians and officials said, complicating a bid to create Europe’s third-largest bank and fund it.

Federal Reserve policymakers see a U.S. economy that is rapidly losing momentum. They predict inflation will miss their 2 percent target for yet another year, despite rising wages, and they expect unemployment to increase.